Finance: IRS & Mileage Deductions

The Internal Revenue Service recently increased the standard mileage rate deduction from 48.5 cents to 50.5 cents per mile. There are certain contingencies to taking the standard mileage deduction, and if you don’t know them, it’s a good time for a refresher course on allowable deductions for the business use of a car. We’ve compiled a summary of some of the general rules. For more information, visit www.irs.gov.

• If you use the standard mileage rate method, you can’t deduct actual expenses, including depreciation, repairs or vehicle registration fees. If you want to qualify for this method, you can’t use a fleet of five or more vehicles in your business, nor can you use your vehicle for hire. You also must not have claimed certain depreciation deductions in the past.

• In of lieu of the standard mileage rate, you can deduct actual expenses. This allows you to include the cost of depreciation, lease payments, registration fees, licenses, gas, insurance, repairs and maintenance, oil, garage fees, parking and toll fees. If you use actual expenses to figure the deduction amount for a car you lease, there are rules that affect the limit amount.

• Parking expenses qualify as a deduction for both the standard rate and the actual expenses methods. They include visits related to meeting a client or attending a business event. However, you can’t deduct expenses associated with parking your car at your place of business.

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• You can’t deduct commuting expenses, even if you carpool with a business associate and discuss work during your commute. Nor can you deduct the costs of public transportation, such as subways and buses, on which you rely to get to and from work.

• The law requires you to keep records to substantiate your deductible claims regardless of which method you use. For the standard mileage rate method, keep a daily log showing miles traveled, destination and business purpose. Keeping a mileage log is also a good idea for the actual expense method, as well as keeping receipts and invoices that document all business-related car expenses.

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